Where should agencies look for innovation?

Startups and government may sound like an unlikely pairing. But according to intelligence workers, they're the perfect match when it comes to innovation.

"Innovation is really happening down at the lower levels at the startup companies," said John Kammerer, the National Security Agency's technical director of high performance computing solutions, during a Nov. 2 panel discussion at NVIDIA's GPU Technology Conference in Washington, D.C.

Tech moves fast, Kammerer said, and while the incumbent companies still have a lot to offer in the way of government contracts, they too are leaning on startups to develop components. The proof, he added, is when the traditional big government contractors scoop up emerging companies.

"You can see the big hitter go after a startup when they see that technology maturing enough that they need to put it in one of their systems," he said. "So they tend to go buy that startup."

So intelligence agencies, in some respect, have learned to go straight to the incubator.

"If you just look at where the R&D dollars have flowed, where the capital has flowed, it's into this community," said Dawn Meyerriecks, the CIA's deputy director for science and technology, who also spoke on the panel. "And it works really well, by the way -- much better … from a taxpayer perspective to team then to do it ourselves."

Meyerriecks said the CIA relied on In-Q-Tel, the venture capital organization created to be a strategic investor for the intelligence community, to handle the market and bring agencies the best.

That approach has dramatically broadened the pool of potential innovators. "Do we stutter-step if there's a large foreign ownership? Absolutely," she said, but "it doesn't have to be a showstopper. … The premise is to start with the best technology and then see if there's a way to get to goodness in terms of the relationship with the company. Because it's really, first and foremost, about solving national intelligence challenges."

The CIA doesn't have special non-recurring engineering arrangements with startups, she said, but instead uses work plans "to put a real problem on the table."

"We don't want to have special one-offs," Meyerriecks said. "That is kind of the worst possible solution. When we contract for our own IP or for government use rights, we have to maintain those code bases. You don't want to be halfway between not owning IP and owning some part of the IP."

Kammerer said the NSA's focus is to isolate the part of the tech that can solve a niche problem, rather than adopting it for NSA's use because it's difficult and "there's very little profit [for] the company from that perspective, dealing with the U.S. government."

Instead, he said, the goal is to enhance existing tech with features that fulfill a mission. "We're just trying to add some features to a certain technology that would give us the mission benefit that we really need and most of the time that's rarely available in the commercial space."

The emerging tech industry has often been wary of working with the government, but executives at the Nov. 2 panel said the benefits are worth bureaucracy.

James Crawford, the CEO of Orbital Insight said their government business was "definitely worth bothering with" in part because the problems were "fantastic."

MAPD, which was incubated by In-Q-Tel and was initially hesitant to enter the federal space, recently hired a head of federal business, Monica McEwen, to deepen its investment. But founder and CEO Todd Mostak said it's not a sector you can break into with brute force.

"You have to be savvy about it," he said. "As a startup, it's not necessarily best to go in through the front door. In federal, it's all about [aligning] with the integrators, the consulting groups, who actually have these relationships and taking the angle of least resistance," by finding a way into deals through those pre-established relationships.

But ultimately, the ball is in the feds' court, and things are moving too slowly on the acquisition side.

"I think our adoption rates are still too slow," Meyerriecks said. "Once we get the right technical teams connected [the work plans] go really well on both sides. But then our acquisition process can kick in."

She added that the CIA has invested in systems to make it easier for companies to deliver software products directly into the intelligence community's private cloud. That setup allows for usage monitoring and tweak suggestions along the way, which Meyerriecks said she hopes will improve adoption rates.